Charitable Giving Planning Options

With the increase in the standard deduction and the elimination and/or limitation of many of the itemized deductions, many taxpayers will find themselves claiming the standard deduction for the first time in years. This creates some planning opportunities around charitable giving, one of the remaining deductions allowed.

Taxpayers over age 70 ½ may want to consider a Qualified Charitable Distribution (QCD) from their IRA. QCD’s are allowed up to a maximum of $100,000 per taxpayer per year, and must be made directly from the IRA trustee to the charitable organization. Required minimum distributions are allowed as QCD’s, and those amounts are not includable in income. The lower AGI resulting from a QCD strategy has many possible benefits including lowering taxable Social Security benefits, larger deductions for medical expenses, and passive losses (up to $25,000) from rental real estate activities in which the taxpayer actively participates, lower net investment income tax, and lower Medicare Part B and prescription drug coverage premiums. For residents of Massachusetts, QCD’s are not included in Massachusetts taxable income.

Consider using a donor advised fund to bundle charitable deductions. Taxpayers who claim the standard deduction do not receive a tax benefit from their charitable donations. If you bundle multiple years of giving into a single year you may be able to itemize again and restore some of your charitable tax deduction. The tax deduction is claimed in the year the donation is made to the donor advised fund. The gifting from the donor advised fund to the charities can then be made of a number of years.

Our long held advice to donate appreciated securities you have held long-term still stands. A charitable deduction is claimed for the fair market value of the securities, and the gain on the securities is not subject to tax. Consider pairing this planning advice with the bunching of securities via a donor advised fund.

Sandra Y Caterine, CPA, MST, is a Tax Principal at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.

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